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Microsoft and Google had “merger” talks

Early on in the success story that has so far been Google, there was an assumption that Microsoft would likely try to buy the company, or at the very least buy a competitor to challenge Google's market lead. Yet late in September Microsoft signaled that while they were in fact planning on entering into competition with the likes of Google, they were planning on building their own technology from the ground up. The timing of that announcement is now rather conspicuous. Sources are saying that Microsoft was previously courting Google, pursuing options ranging from a kind of merger to an outright takeover. It appears that their overtures failed to materialize any deal, so now the Redmond will have to wait; Google is headed in the IPO direction, and if there's a merger to be had, it's likely going to be with a post-IPO Google.

As we reported last week, Google appears to be in preparation to convert to publicly-traded status. A Google IPO would likely be huge, and for good reason: the company has generated a massively loyal fan base matched only by its considerable innovation and quality of service. Still, there are disadvantages to being a publicly traded company, and Google knows this rather well. For one, even with its raging success, Google likely still wants to be able to be a bit secretive: not having to bear the onus of responsibility that comes with being a public company means that you can innovate without telegraphing all your moves. But, of course, going public opens up massive chests of capital for you, and that attracts saints and sinners alike in the business world. And in the case of a company like Google, an IPO does not rule out the possibility of later mergers, especially when the company is rumored to be keeping about 80% of its stock close to its own chest.

The really interesting bit here relates to Microsoft's intentions. It's widely expected that Longhorn will offer even tighter Internet integration than Windows XP, and that surely means that Internet search functionality will be featured more centrally than it is now. If you consider that search technologies are all being explored for ways to present new, useful information to users and to predict their interests (e.g., Adwords), the level of integration could be considerably more than a "search the Internet" option off of the Start Menu. To that end, it appears that Microsoft may be dangling Longhorn in front of the likes of Google as both a temptation and a threat. Visions of Netscape, indeed.

Ken Fisher
Ken is the founder & Editor-in-Chief of Ars Technica. A veteran of the IT industry and a scholar of antiquity, Ken studies the emergence of intellectual property regimes and their effects on culture and innovation. Emailken@arstechnica.com//Twitter@kenfisher